Purpose of Valuation Cap in SAFE

tips for companies and startups

SAFE is an agreement used by startups mainly to raise funds during their seed financing rounds. By using a SAFE, investors invest capital in the company, which converts into equity upon certain trigger events, most commonly a subsequent financing round. A SAFE could contain investor-“friendly” economic mechanisms, such as discount and valuation cap, the first … Read more Purpose of Valuation Cap in SAFE

No Shop Provision in Term Sheet and its Implications

term sheets startups

A term sheet outlines the rights and obligations of parties involved in private equity transactions. Generally speaking, most term sheets being provided by venture capital firms or potential acquirers are non-binding, with only two provisions considered to be binding upon the transacting parties – confidentiality and no-shop (also referred to as “exclusivity”). There are important … Read more No Shop Provision in Term Sheet and its Implications

Why Breakup Fee clauses needed in M&A transactions?

Mergers and Acquisitions transactions

Breakup fee clause, also known as “termination fee” clause, is often included in the Letter of Intent, a Memorandum of Understanding, a Term Sheet or other preliminary documents involved in Mergers and Acquisitions transactions (M&A). Although, as a general rule, M&A’s letters of intent tend to be non-binding in nature, the breakup fee clause is … Read more Why Breakup Fee clauses needed in M&A transactions?

What are Protective Provisions (or veto rights), why do investors insist on having them and how founders should negotiate them?

Protective Provisions

Protective provisions or veto rights are usually granted to the preferred stockholders (stockholders’ purchasing preferred stock) and they allow them to exert power to approve or disapprove specific decisions or actions taken by the company that could have an adverse impact on their investment, or any matter considered to be material. These rights usually serve … Read more What are Protective Provisions (or veto rights), why do investors insist on having them and how founders should negotiate them?

Benefits of SAFE for Startup Founders

smart investing and startups

Simple Agreement for Future Equity, also known as SAFEs, is an agreement mainly (but not only) used by founders to raise capital during the early stages of the startup. SAFEs are considered as an alternative to the established convertible note structure. It provides the advantages of convertible debt minus its disadvantage, in order to simplify … Read more Benefits of SAFE for Startup Founders

Right of First Refusal

Different transaction agreements are executed between the parties for the purpose of purchase and sale of startups’ stock. One such important document is the Right of First Refusal and Co-sale agreement, usually executed in the framework of an NVCA document-based financing transaction. A Right of First Refusal and Co-sale agreement is a multi-party agreement, and … Read more Right of First Refusal

Main Difference between Pre-Money and Post-Money SAFE

safe agreement

Simple Agreement for Future Equity (SAFE) is a legal agreement between startup and investor. Startups use SAFEs to raise capital mostly (but not only) during their seed financing rounds. There are different types of SAFEs, and in this article, we will discuss Pre-Money and Post-Money SAFEs and how they differ from each other. To understand … Read more Main Difference between Pre-Money and Post-Money SAFE

Essential Features of SAFE

Y Combinator

Raising funds during the early stage can be challenging and time-consuming for startups, but that’s when SAFE comes to the rescue. SAFE provides a way to raise capital in a relatively fast fashion, providing efficient and practical solution in funding phases that usually lack certainty. Y Combinator introduced SAFE as an alternative for convertible notes. … Read more Essential Features of SAFE

Vesting Acceleration: 5 factors a Company should consider

Equity compensation may prove to be the most significant compensation a startup grants its employees. In recent decades, thriving start-up businesses have benefitted hundreds of employees granted with equity based compensation. Employees in these start-ups typically agreed to work for lower salaries than those offered by established corporations, and in return were granted with a … Read more Vesting Acceleration: 5 factors a Company should consider

Five Things to Remember about Finders’ Agreements

Do you need to raise capital for your company? If you haven’t yet, you will probably soon be introduced to yet another link in the venture capital world food chain: “finders”. Finders usually come with the promise of saving you time and introducing you and your company to fast, available cash. While in some cases … Read more Five Things to Remember about Finders’ Agreements